GOV.UK
Assets disposed of: series of transactions: approach
It will not be possible to identify a series of linked transactions until the second transaction has taken place. The gain on the first transaction will therefore be computed initially on normal rules. When the second transaction has taken place, you will have to rework the computation in respect of the first transaction to apply the provisions of TCGA92/S19.
If the series involves more than two transactions, on the occasion of each later transaction the number of assets disposed of will change. As a result, after each transaction has taken place, it is necessary to
- establish the aggregate market value of the revised number of assets at the date of each transaction in the series (within the six year period ending on the date of the latest transaction) and
- rework the computations in respect of earlier disposals (within that six year period) to take account of the revised aggregate market values.
This example illustrates the operation of TCGA92/S19.
In April 1980 Mrs A acquired 100 shares in an unquoted company for £80 per share. She has made an election under TCGA92/S35 (5) and Shares and Assets Valuation has agreed the value of the shares at 31 March 1982 as £100 per share. She makes the following transfers to her daughter:
| 1 March 1988 | 40 shares |
| 1 October 1991 | 40 shares |
| 1 July 1994 | 20 shares |
For the purposes of this example, the market values of various quantities of shares in the company are:
| Date | Number of shares | |||
| 20 | 40 | 60 | 80 | |
| March 1988 | £ 10,000 | £ 60,000 | ||
| October 1991 | £ 12,000 | £ 36,000 | £ 80,000 | |
| July 1994 | £ 10,000 | £ 57,000 |
The 40 shares transferred on 1 March 1988 are deemed to pass at market value, TCGA92/S17 and TCGA92/S18:
| Deemed consideration | 10,000 | ||
| LESS | Cost | 40 x £100 | 4,000 |
| Unindexed gain | 6,000 | ||
| LESS | Indexation | 4000 x .337 | 1,348 |
| CHARGEABLE GAIN | 4,652 |
The transfer of 40 shares on 1 October 1991 creates a series of linked transactions and TCGA92/S19 comes into operation.
It is necessary to reconsider the 1988-89 computation
Compare the original market value adopted £10,000
with the appropriate portion (that is 40 shares)
80 shares)
| of the aggregate market value of 80 shares as at 1 May 19988 40/80 x £60,000 = | £ 30,000 | ||
| The latter value is greater and so the 1988-89 computation must be reworked: | |||
| Deemed consideration | £ 30,000 | ||
| LESS | Cost | 40 x £ 100 | £ 4,000 |
| Unindexed gain | $ 26,000 | ||
| LESS | Indexation | 4,000 x .337 | £ 1,348 |
| Chargeable Gain | £ 24,652 |
For the transfer in 1991-92
COMPARE the value which would otherwise apply
(that is, the original market value of 40 shares
as at 1 October 1991) = £12,000
with the appropriate portion (that is 40 shares)
80 shares)
of the aggregate market value of 80 shares
as at 1 October 1991; 40/80 x £80,000 = £40,000
The latter value is greater and so it is substituted as the deemed consideration;
| Deemed consideration | £ 40,000 | ||
| LESS | Cost | 40 x £100 | £ 4,000 |
| Unindexed gain | £ 36,000 | ||
| LESS | Indexation | 4,000 x .701 | £ 2,804 |
| CHARGEABLE GAIN | £ 33,196 |
On the transfer of 20 shares in 1994-95, the provisions of Section 19 apply, but only in relation to the transfers on 1 October 1991 and June 1994. The transfer on 1 May 1988 is disregarded because it was more than six years before the latest transaction.
It is necessary to reconsider the 1991-92 computation:
COMPARE the value adopted following the
previous application of Section 19 on
October 1991 = £40,000
with the appropriate portion (that is 40 shares)
60 shares)
of the aggregate market value of 60 shares
as at 1 October 1991; 40/60 x £36,000 = £24,000
The latter value is not greater than the former and so it is not necessary to recompute the 1991-92 capital gain.
For the transfer in 1994-95
COMPARE the value which would otherwise
apply (that is, the original market value of
shares as at 1 July 1994)= £10,000
with the appropriate portion (that is 20 shares)
60 shares)*
of the aggregate market value of 60 shares
as at 1 June 1994; 20/60 x £57,000 = £19,000
The latter value is greater and so it is substituted
as the deemed consideration;
| Deemed consideration | £ 19,000 | ||
| LESS | Cost | 20 x £100 | £ 2,000 |
| Unidexed gain | £ 17,000 | ||
| LESS | Indexation | 2000 x .821 | £ 1,642 |
| CHARGEABLE GAIN | £ 15,358 |
NOTE. If a taxpayer is within the charge to Capital Gains Tax, neither indexation allowance nor taper relief apply to disposals of assets on or after 6 April 2008. Previously indexation allowance had been frozen at April 1998. Companies and other concerns within the charge to Corporation Tax are not affected by these changes. For indexation allowance see CG17207+ and for taper relief see CG17895+.